in a
Professionally
Managed Portfolio
Derivatives
traded
Exchange
Introduction................................................................................................. 3
Futures Contracts ........................................................................................ 5
Enhancing Investment Portfolio Performance........................................... 7
Investing in Managed Futures .................................................................. 11
Evaluating Managed Futures Investments ............................................... 13
Conclusion................................................................................................. 21
Appendix 1—Glossary of Terms ............................................................. 22
Appendix 2—Industry Information Sources ........................................... 24
Appendix 3—Bibliography ...................................................................... 25
Table of Contents
3
This brochure provides an overview of managed futures,
which is taken here to mean professionally managed
investment portfolios of exchange-traded derivatives
(futures and options on futures contracts). Derivatives
are financial products designed to offer a profit/loss
payoff that mirrors certain aspects of the returns of the
instruments on which they are based, such as securities,
commodities and currencies. Derivative products
include futures contracts, forward contracts, warrants,
swap contracts and related options. The advantage of
exchange-traded derivatives is that regulated exchanges
provide clearing and regulatory safeguards to investors.
Introduction
Over the past two decades, the choice of investment
opportunities has grown from “traditional” instruments
such as stocks, bonds and real estate, to include mutual
funds, hedge funds, foreign securities and managed
futures. Today’s sophisticated international markets pro-
vide new profit opportunities to investors. The ability
of managed futures to access these opportunities has led
to the rapid gro